Insurers face $600 mln claim in Brazil dam burst, sources say

SAO PAULO Nov 10 (Reuters) - Insurers covering risks for a
Brazilian mine where two dams burst last week, killing at least
six people, could pay up to $600 million in claims, a source
with direct knowledge of the matter said on Monday.

A property policy held by the dams' owner, Samarco Mineração
SA, could cover up to $90 million in related claims, said the
source, who requested anonymity because terms of policies remain
confidential.

A separate policy for so-called business interruption events
could pay as much as $510 million if the joint venture between
BHP Billiton Ltd and Vale SA proves that it
lost that much in profits, the source added. It is unclear how
the miner agreed on the $510 million figure with its insurers,
led by ACE Ltd.

Samarco, which operates as an independent mining firm in the
Brazilian iron one-rich state of Minas Gerais, earned 2.8
billion Brazilian real ($747 million) in net income last year.
The venture produces 30 million tonnes of iron ore annually, or
about 2 percent of global capacity.

Experts could take at least 90 days to investigate the
causes of the disaster in southeast Brazil, a second source
said, adding that the owners face a lengthy process of
calculating lost profits from the flood, which left 21 people
missing.

The lead underwriter of the combined property and business
interruption policies is Zurich-based ACE, which is liable to
pay 80 percent of the amount covered, the source added. Spain's
Mapfre SA and Canada's Fairfax Financial Holdings Inc
also form part of the team of underwriters, the source
added.

Germany's Allianz SE provides the venture with a
separate policy for civil liabilities, which had a coverage of
about 70 million reais as of June 2014, according to a Samarco
bond prospectus. The second source said that such coverage could
be "too small" to pay for extensive environmental damage, let
alone what courts decide as compensation for families of the
victims.

That potential shortcoming could fuel investors doubts about
whether Samarco has enough insurance to cover all of the
disaster costs. It also remains unclear whether there is any
scope for the cost of the damages to spread to other entities
such as builders or state entities, as well as BHP and Vale.
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